What are the components of total cost of ownership?
There are several key components to total cost of ownership. Some of the most important fleet TCO components include:
- Acquisition Costs - this includes the purchase price of the vehicle, supplier margin, costs to operate the purchasing department, transport and delivery charges, packaging, customs duties, and any associated financing costs.
- Operating Expenses - operating expenses include the cost of operating fleet vehicles. For example, stock management, depreciation costs, fuel, taxes, insurance, administrative costs, etc.
- Repair and Maintenance Costs - this includes all the costs associated with keeping fleet vehicles in good working condition. Fleet maintenance and repair costs may include the cost of new tires and brakes, oil changes, and preventative maintenance work.
- Resale Value - the amount that the vehicle (or fleet) will be sold for when it is retired should also be accounted for in TCO.
- Downtime - when a vehicle is not on the road, it is not providing value. This opportunity cost, or the amount of revenue and goodwill that is lost as a result of downtime, should be considered by fleet managers as a cost to the business.